1.Which of the following is an example of a liability?

		The amount contributed to the business by your partner
		An amount which must be paid to a business that sold your company supplies
		Equipment purchased by the business with cash
		The obligation to transfer the net assets of the business to its owners

2. Which of the following is not a liability for accounting purposes

		You borrow $100,000 to buy a new piece of equipment
		You promise to increase wages in the coming year by $1 per hour.
		Your workers have worked all week and you will pay them next Wednesday.
		An amount which must be paid to a business that sold you some supplies

3.The formula to compute annual straight-line depreciation is:

		Depreciable cost divided by useful life in units.
		(Cost plus salvage value) divided by the useful life in years.
		(Cost minus salvage value) divided by the useful life in years.
		Cost divided by useful life in units.

Solutions

Expert Solution

1.Which of the following is an example of a liability?
The amount contributed to the business by your partner	Wrong answer: This is an example of Equity
An amount which must be paid to a business that sold your company supplies	CORRECT ANSWER: Supplies purchased on accounts leads to creation of Accounts Payable (a liability)
Equipment purchased by the business with cash	Wrong answer: asset purchased by paying cash = no liability
The obligation to transfer the net assets of the business to its owners	Wrong Answer: Its not a liability

2. Which of the following is not a liability for accounting purposes
You borrow $100,000 to buy a new piece of equipment	Wrong answer: it’s a liability as payment for equipment will have to be made.
You promise to increase wages in the coming year by $1 per hour.	CORRECT ANSWER: Promise to increase wage is not a liability for accounting purpose.
Your workers have worked all week and you will pay them next Wednesday.	Wrong answer: it’s a liability as wages are accrued.
An amount which must be paid to a business that sold you some supplies	Wrong answer: Supplies purcahsed on account is a liability

3.The formula to compute annual straight-line depreciation is:
Depreciable cost divided by useful life in units.	Wrong Answer
(Cost plus salvage value) divided by the useful life in years.	Wrong Answer
(Cost minus salvage value) divided by the useful life in years.	CORRECT ANSWER
Cost divided by useful life in units.	Wrong Answer

ekkarill92 answered 2 years ago

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